Mixed Trend May Linger On Profit, Position-taking As Investors Digest Earnings, Economic Data

Market Update for April 27
Monday’s trading activities on the Nigerian Stock Exchange (NSE) was mixed as equity prices wobbled on buying increased interest among highly capitalized stocks and profit booking, resulting in marginal growth in the key performance indexes. This extended the previous session’s bullish stance on a very low traded volume that signaled weakness and indecision as investors waited to see whether or not the Federal Government would further extend the lockdown to still contain the Coronavirus pandemic in Lagos, Ogun and the Federal Capital Territory, Abuja.

The lockdown is gradually being eased for economic activities to resume in many countries of the world, a move that would likely to drive demand for crude oil and support its price recovery after the historic crash, amidst the continued spread of the Coronavirus (COVID-19) pandemic across the globe. So far, the number of infected people crossed three million, with over 290,000 deaths recorded, even as Nigeria has seen its number of new cases doubling on a daily basis since it crossed the 1000 mark, rising to 1327. Of this number, there has been 44 deaths, while 228 have been treated and discharged.

Stanbic IBTC and Fidelity Bank released their Q1 results with mixed numbers. While trading income boosted the earnings of Stanbic, credit loss expenses impacted negatively on the bottom line of Fidelity Bank (READ MORE). With Nigeria banks remaining resilient over the years, it is expected that the banks will overcome the current challenges arising from oil prices, lockdown, global and domestic economic downturn somehow in the remaining months.

Despite the gloomy world economy, equity markets around the globe remain active after making lows in March and rebounded in the midst the lockdown that resulted in the shutting down of factories and economies, the oscillating mode or trend in stock markets, however, threw up opportunities in equity assets, following which smart money has continued to take advantage of the ensuing low prices.
Money Flow index continues to look up, rising from a low of 7.98 points on April 3, 2020, to 75.82 points, which is the peak level the indicator touched in January before pulling back on profit-taking and policy adjustment from the Central Bank of Nigeria (CBN). This suggests that smart money is entering the market, irrespective of the prevailing economic challenges. This calls for a change of strategy if one is to profit from the changing market dynamics while protecting your capital.

Meanwhile, Monday’s trading started green and was sustained throughout the session despite the oscillation on position and profit-taking in financial services and large companies stocks, which pushed the NSE’s composite All-Share index to an intraday high of 22,649.20 basis points, from its low of 22,584.64ps, before closing slightly high at 22,616.28ps on a negative breadth.
Market technicals for the day were weak and mixed on a lower volume traded than the previous session, with breadth favoring the bears and mixed sentiment as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ volume of 49% and sell position of 51%. Total daily transaction volume index stood at 0.30, while momentum behind the day’s performance stayed strong with Money Flow Index reading 75.82 points, up from the previous 68.61ps, indicating that funds entered some stock and market.

Index and Market Caps
The NSEASI ended the day trading marginally up by 16.90 basis points to close at 22,616.28ps from the opening level of 22,599.40ps, representing 0.07% up, while market capitalization gained N8.81bn at N11.79tr from an opening value of N11.78tr.
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The day’s upturn was impacted by buying interests in high cap stocks like MTNN, Guaranty Trust Bank, Zenith Bank, Access Bank, and Oando. These impacted mildly on the NSE index and reduced its Year-To-Date loss to 15.74%, while market capitalization YTD stood at N1.28tr, representing an 8.37% drop from the year’s opening value.

Bearish Sector Indices
The sectorial performance indexes were largely bearish, except for the NSE Banking, as well as Oil/Gas that closed by 1.12% and 0.39% respectively, while the NSE Consumer Goods index led the decliners after losing 1.90%, followed by the NSE Insurance and Industrial Goods that fell by 0.25% and 0.04% respectively.

Market breadth, turned negative as decliners outnumbered advancers in the ratio of 14:8, just as activities in volume and value terms fell by 48.91%% and 40.33%% respectively, after investors traded 108.12m shares worth N1.33bn, from the previous session’s 211.62m units valued at N2.23bn. The day’s volume was boosted by trading in Lasaco Assurance, Guaranty Trust Bank, UBA, FBNH, and Access Bank.
The best-performing stocks for the session were LASACO and Chams, which gained 8.33% and 4.76% respectively, closing at N0.26 and N0.22 per share on market forces. On the flip side, Nigerian Breweries and Skypower Aviation lost 10% and 6.58% respective, closing at N31.05 and N1.42 per share respectively, on profit-taking and selloffs.

Market Outlook
We expect the mixed trend to continue on profit and position-taking as players digest corporate earnings released so far and economic data, ahead of more corporate scorecards, even as MFI revealed smart money portfolios repositioning in the midst of crashing and oscillating oil prices.
However, the market’s high dividend yield continues to attract buying interests, while more audited corporate earnings hit the market going forward, despite the likely continuation of selloffs, with investors buying to increase their positions in undervalued stocks ahead of dividend declaration and Q1 numbers. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.

Also, investors and traders are positioning amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend. We see investors focusing on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the New Year.
This was noted in the 10 golden stocks and trading ideas for 2020, as discussed extensively during the Investdata 2020 Traders & Investors Summit held in Lagos.

Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives, and their impact on the economy in the nearest future.
Meanwhile, the home study packs of our Invest 2020 Opportunities and Trade Ideas Summit, containing different Stocks for various investment objectives in 2020 and beyond are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.

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